Finally understand your health insurance costs

When choosing a health insurance plan through the Marketplace, it’s a good idea to understand common insurance terminology. That way you will have a better understanding of your health insurance costs, i.e. how much you can expect to pay throughout the year. So if you’ve ever asked yourself, “what is a deductible” or “what is the difference between coinsurance and copayments,” we’ve got you covered.

In this article, we want to introduce you to our friend, Hank. His story will help make these terms a little less confusing.

▶︎ We also created a FREE guide that breaks down each of these terms. Grab it here and save to your computer for future reference.

Hank’s new plan is broken up into a few key components – his premium, copayment, deductible, coinsurance, and out-of-pocket max. Now let’s look at each of these in detail:

What is a premium?

Your premium is the monthly bill you pay for your health insurance plan. The total amount you will pay for your premium (along with your deductible, out-of-pocket max, and coinsurance — which we’ll talk about a little later) is determined by a handful of factors including where you live, your income, and your household size.

Pro Tip: If you enroll in health insurance through the Marketplace, it’s also important to know about subsidies. A subsidy is when the government helps reduce your monthly premium and out-of-pocket costs. You can find out if you qualify here.

Let’s check in with Hank to see how this works:

What is a copayment?

A copayment is the fixed amount you pay for specific health care services. For example, you might have a $25 copay when you visit your primary care provider and a $15 copay when you refill your prescriptions. Once you pay that flat fee, your insurance will cover the rest.

Let’s see how this impacts Hank:

What is a deductible?

Your deductible is the amount you’re required to pay before your insurance starts helping you cover the cost. For example, if your deductible is $3,000, once you have paid that amount, your insurance carrier will start covering a certain percentage of your bills (which we’ll talk about next). It’s also important to know that your deductible usually resets every year on January 1st. However, every plan is different so it’s important to read through your policy.

Pro Tip: Typically, if you choose a plan with a lower deductible, you will have a higher premium and vice versa. Lower deductible plans have higher premiums which typically means a better option for people who need to utilize services right away. Higher deductible plans have lower premiums which typically means a better option for those who don’t need to utilize a lot of services right away.

Now back to Hank:

What is coinsurance?

Once you hit your deductible, you still have to pay a certain percentage of your medical bills (until you reach your out-of-pocket max). So let’s say your coinsurance is 20%. Once you hit your deductible, a $100 bill will now only cost $20. 20% of $100 = $20

Let’s see how this affects Hank:

What is an out-of-pocket max?

Your out-of-pocket max is the most you will pay during your coverage period (typically 12 months). For example, if your out-of-pocket max is $6,000, you will never have to pay over that amount during the year. This includes the amount you spend on copays, coinsurance, and deductibles.

Let’s check in with Hank to see what happens next:

In conclusion

Now that Hank has helped us explain the difference between each of these terms, we’re hoping you have a better understanding of your health insurance costs. And the more you know, the easier it is to predict how much you might spend throughout the year. If you still have questions about your premium, deductible, or out-of-pocket max, you can reach out to our Consumer Advocate team at (855) 772-2663.